How it works
You make after-tax contributions to your 401(k) on top of the regular limit, and then you convert them to Roth. After that, the money grows and comes out tax-free in retirement.
Your plan has to allow both steps. Some plans let you convert inside the plan, which is the simpler route, and some let you roll the money out to a Roth IRA while you’re still working there. Many plans allow neither, in which case the strategy isn’t available to you.
It helps to know that after-tax and Roth aren’t the same thing. After-tax contributions usually don’t get an employer match, and until they’re converted to Roth, anything they earn is taxable when it comes out. So I’d make sure the conversion is set up before you start contributing.
Roth 401(k), backdoor Roth, and mega backdoor Roth
These three sound alike, but they’re different things with separate limits, and you can use more than one in the same year.
| Route | How it works | What limits it |
|---|---|---|
| Roth 401(k) | You put some or all of your regular paycheck contribution into Roth. You pay income tax on it now, and it comes out tax-free in retirement. | It shares the $24,500 limit for 2026 with your pre-tax contributions. There’s no income limit. |
| Backdoor Roth IRA | You make a nondeductible contribution to a traditional IRA and then convert it to a Roth IRA. | The IRA limit is $7,500 for 2026, before catch-up. If you have other pre-tax IRA money, part of the conversion is taxable. |
| Mega backdoor Roth | You make extra after-tax contributions to your 401(k) and convert them to Roth. | You can use whatever room is left under the $72,000 total limit after your regular contributions and your employer’s match. |
- How it works
- You put some or all of your regular paycheck contribution into Roth. You pay income tax on it now, and it comes out tax-free in retirement.
- What limits it
- It shares the $24,500 limit for 2026 with your pre-tax contributions. There’s no income limit.
- How it works
- You make a nondeductible contribution to a traditional IRA and then convert it to a Roth IRA.
- What limits it
- The IRA limit is $7,500 for 2026, before catch-up. If you have other pre-tax IRA money, part of the conversion is taxable.
- How it works
- You make extra after-tax contributions to your 401(k) and convert them to Roth.
- What limits it
- You can use whatever room is left under the $72,000 total limit after your regular contributions and your employer’s match.
If you’re doing a backdoor Roth IRA, watch out for the pro-rata rule. When you convert, the IRS looks at all of your traditional, SEP, and SIMPLE IRAs together, so if you have an old rollover IRA with pre-tax money in it, part of your conversion will be taxable. Opening a new IRA doesn’t get around this. I’d have your tax preparer run the numbers on Form 8606 before you convert.
You can make your regular contributions pre-tax and still use the mega backdoor Roth for the extra. Whether to go pre-tax or Roth on the regular part comes down to whether you’d rather have the tax break now or in retirement.
How much room you have
In 2026, a total of $72,000 can go into your 401(k). Your after-tax room is what’s left after your own regular contributions and your employer’s match.
This assumes you’re under 50, contribute the full $24,500, and your employer matches 50% of it. Use your own match amount.
- 2026 total contribution limit
- $72,000
- Your regular pre-tax and Roth contributions
- − $24,500
- Your employer’s match
- − $12,250
- Room for after-tax contributions
- $35,250
A hypothetical example. If you’ve already made after-tax contributions this year, subtract those too.
There are a few limits to be aware of. Your total contributions can’t be more than your eligible pay, only the first $360,000 of pay counts for 2026, and your plan can set a lower cap than the IRS does.
If you’re 50 or older
You can add catch-up contributions on top of the $72,000. That’s another $8,000 in 2026, or $11,250 if you turn 60, 61, 62, or 63 this year. If you earned more than $150,000 from your employer in 2025, your catch-up contributions have to be Roth, though your regular contributions can still be pre-tax.
If you changed jobs this year
The $24,500 limit applies to you across all of your employers for the year, so anything you contributed to your last company’s 401(k) counts against it. Let your new plan know what you’ve already contributed so you don’t go over.
I wouldn’t max out everything if it leaves you short on cash. This money is locked up until retirement, so make sure you can still cover a down payment or an emergency.
What happens to earnings before you convert
Say you contribute $10,000 after-tax and it grows to $10,200 before it’s converted. You’ve already paid tax on the $10,000, so only the $200 of growth is taxable in the year you convert. The sooner the conversion happens after each contribution, the less there is to tax, which is why an automatic conversion is worth turning on if your plan has one.
If your plan lets you roll money out instead, you can send the after-tax contributions to a Roth IRA and the earnings to a traditional IRA. That delays the tax on the earnings, but it leaves you with a pre-tax IRA balance, and that makes a backdoor Roth IRA partly taxable. For most people I think converting inside the plan is simpler.
How this works at your company
The rules above are the same wherever you work. These guides cover what’s specific to each company.
Meet your financial advisor
Simple Money Advisors LLC is a California state-registered investment adviser.
Vaibhav Goel
Co-founder of Simple Money · Registered financial advisor · SEC record
Investment adviser representative, registered with the State of California.
Vaibhav spent fifteen years building products at Google, DoorDash and Microsoft before becoming a licensed advisor. He works with people in tech on the whole picture, equity, taxes, investments and cash flow, as one plan rather than four.
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